Switzerland’s CHF30bn (€24.4bn) first-pillar pension fund AHV has returned 2.8% over the course of 2013, performing well below the Swiss national average of 6%.
Explaining the results, Marco Netzer, chairman of the board, pointed out that the fund had been compelled to invest “a large part of its assets” in fixed income due to the social fund’s low-risk profile.
AHV also manages money for invalidity compensation scheme IV (CHF4.7bn) and EO, the scheme for people in military service or on maternity leave (CHF600m).
As per year-end 2013, the fund had 52% in bonds, mostly domestic, another 13% in loans and 26% in equities.
The remainder was invested in real estate (5%) and commodities (2%).
“Unlike in previous years, these fixed income investments contributed negatively to the performance, while equities achieved a two-digit return,” Netzer said.
To better cope with the duration risk in the fixed income segment of its portfolio, the AHV has added a “cash” position to support its duration risk overlay, he said.
This will be kept in place for 2014 – other possible changes to the asset allocation will be published “later in the year”.
“In the scope of a possible further diversification of the portfolio despite the extensive need for liquidity, we have started an analysis and a specific project,” Netzer said.
He also pointed out that the AHV and its subfunds had changed their name to 'compenswiss' to better reflect their multi-lingual participants, as AHV/IV/EO are abbreviations in German.
Analysts have warned of financing problems for the first-pillar fund in the coming decades due to demographic developments and government plans to increase the VAT in order to increase contributions to the AHV under its Altersvorsorge 2020 proposal.
Towers Watson, meanwhile, has published the results of a survey among Swiss company executives, most of which fear that their companies’ pension plans are “not fit for 2020”.
Almost half of survey respondents said their pension plans would require adjustments in the near future, and nearly all acknowledged that this would entail higher costs.
Around one-third cited demographic changes as the major challenge for the second pillar over the next decade.